Is gold price in a bubble?

Investment Analysis Clubs Macro Economic Trends and Risks
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https://www.wsj.com/finance/investing/gold-prices-rise-is-it-possible-f667b8b8

Is Gold in the Grips of a Speculative Bubble?

The danger is that gold is in the grip of exactly the sort of speculative excess that creates bubbles in other parts of the financial system

By James Mackintosh, The Wall Street Journal, Oct. 17, 2025

…

The basic case for gold is that the world needs an alternative to the dollar. The shift into gold started with the freezing of Russian reserves after Russia invaded Ukraine, prompting central banks in developing countries to question how secure claims on Western governments would be in a crisis.

Investors joined in this year as they worried about the independence of the Federal Reserve, the scale of government debt and the risk that politicians take the easy route and choose inflation over repayment….

The long-term case is the “debasement trade,” the idea that indebted and politically-weak governments will eventually do the opposite of Volcker and choose inflation over recession. Gold provides insurance against interest rates being kept too low in the long run….

The short-term case is more questionable. Gold took off in August after Fed Chair Jerome Powell signaled in a speech at Jackson Hole that he was moving from a focus on inflation to a focus on jobs. This “Powell pivot” raised expectations of interest-rate cuts—which is an obvious reason to buy gold if you think the economy’s already running hot, and through Thursday, gold was up 28% since.

Yet, bond markets and the dollar flatly disagree. Rather than pricing in more inflation, bond investors have priced in lower inflation… [end quote]

This article doesn’t mention the gold buying by sovereign states like China and India which are trying to establish a foundation for their own currencies. China especially.

Based on the official data from the People’s Bank of China (PBOC) and analysis by the World Gold Council (WGC), China has bought a significant amount of gold in 2024 and 2025.

China, Russia and India. have been actively increasing their holdings.

Here are the key reported figures from China’s central bank:

Official Central Bank Purchases (People’s Bank of China)

Period Reported Gold Purchases
Full Year 2024 44.2 tonnes
Year-to-Date 2025 (through September) 22.7 tonnes
Total (2024 & 2025 YTD) Approximately 66.9 tonnes

China’s official reserves stood at 2,298.53 tonnes as of a recent quarter in 2025. They appear to be gradually adding.

United States Gold Reserves: Approximately 8,133.5 metric tons. The U.S. is not adding to gold reserves – a darn good thing since our deficit is massive and shouldn’t be spent on gold.

Bubbles are supported by new money bidding, whether it’s a tulip, stock or gold. If the heavy buyers decide they have enough physical gold and stop bidding the bubble could deflate. That’s a big IF. Also WHEN.

Wendy

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They are reacting to anticipated Fed rate cuts…

Every price rise is not a bubble… Gold moved up sharply recently, my August purchases, within 2 months was up as high as 30% by last thursday!!!

Is it natural for Gold to correct, consolidate, yes. But, this purchase and price rise is not due to some speculators bidding up prices, a la meme stocks. Even if the buyers scale down their purchase, they are not going to turn around and sell. Some weak hand speculators like me might sell, but central banks, and most of the retail purchases in China and India are not going to sell.

The bubble when bursts should take the price back to where it started… I doubt that.

Normal price rise, corrections are not bubble.

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There are two risks for gold: one mass unemployment knocks out the crazy speculators, and two the federal government discusses in seriousness at the bottom of the bust we are entering raising corporate taxes. A rise in corporate taxes would shift the economy to more productive manufacturing.

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Here is another take…
Most here argue, US markets valuations are stretched, and had spectacular run since 2010, there is massive leverage in the system, and the bubble could burst anytime…

then why Gold is not a hedge against a correction similar to GFC??? Why the price rice is a bubble???

For those who are going to argue in favor other stock markets, the US markets are 65% of the total work market cap’s, and the exposure of the world to US markets are at record… so if US goes down, the entire world is going to suffer its economic consequences… So the RoW is not a hedge.

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Because the wealth effect is echoing through all assets. Gold is not immune.

What I said above applies to all asset classes.

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So central bank purchases are due to wealth effect??? or Chinese, Indians retail purchase is due to wealth effect? They are not. These are just some meaningless word salad.

Indian retail holding of gold is 35,000 tonnes. What is more impressive than that is, that retail holding has never seen a decline. Indian, and Chinese retail had been a net buyer of gold for decades, centuries, not sellers.

We all confuse our belief as data.

The gold can very well decline, consolidate from its 30% rise. But that will be a buy the dip moment. Watch out $5000 per oz is coming in 2026/ 2027.

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We all know COVID created massive unemployment, what kind of reaction it triggered??? Again, I will point out Chinese, Indian retail gold holding behavior. Even in times of greater financial distress these people typically take loan against Gold, by bledging it, but will not sell it… they use gold as collateral to borrow, but will not sell…

Average USians don’t understand the world… or the global nature of Gold.

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Gold is definitely in a bubble.

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  • In 1981, gold is the #1 central bank reserve.
  • Slowly, USD became reserve currency.
  • Since 2008, post GFC, Central banks again started buying Gold, note, central banks started buying since 2008, and it got slightly accelerated since Russia-Ukraine war, but the buying started 17 years ago, and it is continuing. Why anyone would expect it to suddenly stop???
  • Today Gold, as central bank reserve is behind USD, but #2, above Euro…

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We may consolidate, move sideways, pullback a bit, but unless the major buyers, central bank, and the 3 billion retail investors in Asia alone, who continue to buy gold, continue their behavior, Gold is a long-term asset.

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People were paid to be unemployed, and pay went up across the country as people came back to work. In fact pay rose constantly after people were fully employed again, people got promotions, and people started new businesses.

When people were unemployed at first the market tanked.

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Even once in a century pandemic didn’t create mass unemployment or the governments stepped in to mitigate them. So, talking about that as a regular economic outcome and worry about it is useless.

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He will default on the debt. Just stop writing the checks so to speak. That has never been done before.

What are you going to say when he won’t keep paying the interest on $41 trillion of debt? “We need to pay that”? Hardly. It will befuddle the average guy. It will crush the global economy.

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I know most of us don’t pay attention to these things…

Under the Basel III regulations, physical gold is now classified as a Tier 1 asset, or High-Quality Liquid Asset (HQLA), for U.S. banks, effective July 1, 2025. This change allows banks to count 100% of the market value of their unencumbered physical gold holdings toward core capital reserves, similar to cash or U.S. Treasuries. Previously, gold was considered a riskier Tier 3 asset

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Why would you not assume this is a bubble?